Tom Harkin (D-IA), chairman of the Senate Committee on Health, Education, Labor and Pensions (HELP), introduced a comprehensive Higher Education Act (HEA) reauthorization bill on June 25. The Higher Education Affordability Act (HEAA), which includes several provisions for which NASFAA has been advocating, takes the form of a discussion draft and marks the HELP Committee’s first step toward reauthorization of the Higher Education Act. This article is the third in a series that will examine various provisions proposed by this bill.

The Harkin discussion draft bill proposes several changes to the Federal Methodology used to calculate a student’s expected family contribution. It would also make changes to the resources and tools that the federal government manages to help students make choices related to college attendance. This article describes changes proposed by the bill in the following areas:

Use of prior-prior year income in need analysis

The Harkin bill would change the year used to define family income from the year immediately prior to the award year (“prior year”) to the second year prior to the award year (“prior-prior year,” or “PPY”). Under current law, a student’s expected family contribution (EFC) for 2015-16 is calculated based on the family’s income received during 2014, as reported in early 2015 on the federal income tax return. If a family has not yet filed a tax return, they are asked to estimate their 2014 income. In that case, they will need to correct or verify their financial information, which could delay availability of aid or result in revisions to their aid package.

Under the Harkin bill, the 2015-16 EFC would be based on family income for the 2013 calendar year, as reported on the tax return. The percentage of tax filers who have filed their 2013 tax return at the time they need to file the 2015-16 FAFSA would be higher than those who had already filed for 2014. Thus, fewer applicants should need to verify or correct income information. As a result, it should be possible to make the FAFSA available earlier than under the current approach, although it could take up to two years before ED could produce the FAFSA earlier, according to officials at the NASFAA conference. Even though income may have increased over the two-year period, most families would have moved forward in tandem, so that the relative need for financial aid using EFC as more of a rationing device for limited aid funding than a true measure of available dollars should remain fairly consistent.

NASFAA’s reauthorization recommendations include a move to PPY. In 2013, NASFAA published a study examining the implications of a prior-prior year methodology. The idea has taken off, with a move to prior-prior year also proposed by House republicans in their initial HEA bills and in a bipartisan bill co-sponsored by Senators Alexander and Bennet.

Income Protection Allowance

The Harkin bill would raise the income protection allowance (IPA) that offsets income for students (dependent and independent) for 2015-16 by $4,000 over the allowances for 2014-15. By comparison, the allowances for students increased from 2013-14 to 2014-15 by a range of $190 to $410. As is currently the case, IPAs for subsequent years would be adjusted by a formula linked to the Consumer Price Index (CPI).

Increasing the IPA would decrease the EFC. Allowances for parents of dependent students would not be affected. Thus, the gap between parental IPAs and independent student with dependents IPAs would continue to widen. In 2014-15, for example, the IPA for parental income for a family of 4 with 1 in college is $26,830, an increase of $540 over 2013-14. The 2014-15 IPA for an independent students with dependents with a family size of 4 and 1 in college is $37,890, an increase of $760 over 2013-14. For 2015-16, the Harkin bill would increase that independent student’s IPA to $41,890, while the parental IPA would continue to increase minimally, based only on increases to the CPI.

Homeless and Foster Care Youth Provisions

The Harkin bill would strengthen, clarify, and simplify the provision deeming unaccompanied homeless youth independent students for Title IV student financial aid purposes. The bill would clarify that schools are not required to verify homelessness determinations made by authorized individuals who work with homeless youth in certain settings, and that a phone call with, or written statement from, an authorized individual is sufficient to resolve conflicting information.

Currently, in the absence of a determination made by an authorized individual, financial aid administrators may undertake that determination. The bill would specifically require financial aid administrators to conduct verification that a student without such a determination is a homeless unaccompanied child or youth in accordance with the McKinney-Vento Homeless Assistance Act, or is unaccompanied, at-risk of homelessness, and self-supporting based on either written documentation or a documented interview with the student.

Determinations of homelessness by any authorized individual would still have to be made during the school year in which the student initially submits the application, but the independent status resulting from that determination would extend to subsequent years unless the student informs a financial aid administrator of changed circumstances, or the aid administrator has conflicting information.

The bill would direct the Department of Education's Student Loan Ombudsman to assume responsibility for resolving complaints from these students regarding their independent status.

Public institutions would be required to charge in-state (or lower) tuition rates to homeless and foster care children or youth who graduated from high school in that state, obtained the equivalent of a high school diploma in that state, or lived in that state while attending high school in an adjacent state. Homeless children or youth in this context are defined by the McKinney- Vento Homeless Assistance Act. This provision would parallel a provision in current law that already requires in-state or lower tuition rates for certain active duty military personnel and their families.

Military Measures

The Departments of Veteran Affairs and Homeland Security would be directed to create a searchable website that explains all educational rights and benefits applicable to service members and veterans (including all federal and state aid available to them as students).

Various federal agencies would be charged with cooperatively creating a disclosure and enrollment form to enable military and veteran students to obtain their rights and benefits.

The Department of Education's Student Loan Ombudsman would have to designate one or more employees to be a military and veteran point of contact.

Mandatory Financial Aid Award Letter

The Harkin bill would mandate use of a standardized award letter, in written or electronic form, effective 12 months after ED has finalized it based on recommendations from various affected parties, including institutions. ED would have to prepare multiple designs and formatting for consumer testing within 6 months of enactment.

The bill includes a long list of required elements that must be included, although ED would be allowed to alter these criteria based on consumer testing. Subject to that caveat, the following information would have to be included on the first page:

Cohort default rate information (if more than 30% of enrolled students borrow)

Other elements identified by ED

In addition to the first page content, the mandatory award letter would have to include, in a "concise format," the following information:

Concise summary of terms and conditions of any awarded gift aid, work, or loans, and a method, such as links, to provide supplementary information.

At the institution’s discretion, additional options for paying for the difference between the student's COA and awarded gift aid. These options could include the EFC, PLUS loans, private loans, etc. If the institution recommends private education loans, the financial aid award letter would have to contain several other disclosures.

Disclosures related to the period covered by the award and the fact that aid fir subsequent periods might differ.

The effect of non-institutional scholarships on the aid package.

Concise summary of Federal or institutional conditions for receiving and renewing aid, and a method, such as links, to provide supplementary information.

The bill sets forth other requirements for the design and formatting of the financial aid award letter, such as subtotals to clearly distinguish between gift aid, loans, and work; standardized terminology developed in consultation with affected parties; information about Federal loans if the student’s maximum eligibility is not included in the award package; notification of possible eligibility for military or veterans benefits and where information about the benefits can be located.

If an award letter is provided in electronic format, it would have to include an attestation that the student has accessed and read the letter.

Informational Tools and Resources

The Harkin bill would expand the information about faculty on College Navigator. In addition to the number of full-time and part-time faculty, information would be included about the number of returning faculty, by full-time and part-time status, tenure status, and contract length.

A section concerning the College Scorecard would be added to the law directing ED to develop a website to provide students and families with information regarding higher education affordability and value for each institution of higher education that receives Title IV funds. ED already has a College Scorecard page as part of its College Affordability and Transparency Center. The current Scorecard gives comparative information, with visual representations, about costs including net price, graduation rate within 150% of normal time and transfer-out rates, default rate, and median Federal loan debt including monthly repayment amounts, and notes that information will be coming about employment of graduates. The Harkin bill would require net price to be shown for subgroups of students according to income categories, and would add completion rates at 100% of normal time and transfer-out rates within 100% of normal completion time. It would also add persistence rates (term to term as well as year to year) and would require both mean and median student loan debt including private education loans, with expected monthly repayment amounts for both under the 10-year plan. The Scorecard would also have to specify the institution’s type (public, private nonprofit, or private for-profit). Institutions would be required to link to the Scorecard from their own websites and distribute the Scorecard to prospective and accepted students.

The bill would establish minimum requirements for the presentation of information in institutional net price calculators, effective within a year of enactment. Within 2 years of enactment, ED would have to develop a universal net price calculator that will return net prices for any institution in response to one set of questions asked of the student seeing information.

NSLDS would be expanded to add health loans and would incorporate the military and veteran status of borrowers and data about veterans who are eligible for VA education benefits by integration with information from the Departments of Defense and Veterans Affairs. The bill would also include private education loans in NSLDS.

Consumer Testing

ED would be directed to establish, within 6 months of enactment, a process for consumer testing each of the following (some of which would be created by this legislation):

Universal net price calculator;

College Scorecard;

Postsecondary education information form;

Master promissory note;

Standard notification format for delinquent or at-risk borrowers;

Institutional financial aid award letter;

Methodology for comparing institutions using the speed-based repayment rate

Online entrance, exit, and interim loan counseling tools

Personalized periodic statement required for borrowers who are automatically enrolled into an income-based repayment plan and consent form for borrowers with $0 payment.

Thereafter, ED would be required to conduct consumer testing every 5 years and would be required to report the results to Congress.

Publication Date: 7/11/2014

Marguerite J |
7/11/2014 11:20:35 AM

"If an award letter is provided in electronic format, it would have to include an attestation that the student has accessed and read the letter." How is the institution supposed to attest that the student opened and read the electronic letter?

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